Gents,
Just a homeowner who does not want to have problems going forward. Thank you in advance for your help.

Old tank is leaking. Going to replace. Plumber says go Rinnai. I say, lets talk. We chat and he says that he needs to upgrade the gas line to 3/4" from the 1/2". Makes sense, no sweat. Here is the kicker.

Propane tank has 1/2" copper into the ground. It runs for 55' underground.
House has 3/4" black pipe coming out of the ground 8".
8" line expanded to 1" line for 3"
90 degree bend into house with 1"
1" line in attic

House was built in 75. Tank is surrounding on all 4 sides with concrete. Appears to have 1" line running along and then they tapped off with 1/2" to feed each propane appliance. House has 2 gas LP water heaters, LP range/oven, and LP furnace.

So plumber says he will tie into the 1" line with 3/4" and all should be fine? That scares me a little since 1/2" at the start seems to be the bottle neck. Now maybe the 1" allows for enough volume since it is exapnded and there is nearly 50' of 1" black pipe in the attic but I still am feeling uneasy about this. There is only one regulator and that is at the house.

Since the tankless will only be supplying 2 bathrooms and the wife takes long showers I thought that it would be a nice touch. Propane ain't cheap either and if I save 10% a year on my propane bill then that would be $200. It would take 4.5 years to break even on the upcharge.

Regardless, I think I want this if the plumbers idea works. My question to you guys is this, will it work? I called Rinnai and they said the unit I was told to use needed 8.5"-13.5" water column pressure (?) to run properly. It's odd but I think it will but don't want to spend the money only to fail.

Not sure about the Rinnai, but the tankless units I have installed specified 3/4" for natural gas and 1/2" for propane. But, the "bottleneck" as you call it does not really exist as long as the smaller pipe just goes for a short distance before increasing. Gas meters are often 3/4" for a foot or so, and then increase to the necessary pipe size, which could be all the way up to 2".

Half inch propane line is only good for tankless-input levels up to a length of ~10-15 feet. If you have 55' of buried half-inch, you're S.O.L., getting only about half what the tankless needs, let alone anything else that's drawing from the same long-skinny straw. Your odds of having problems with both a furnace and a tankless on a 55' length of half-inch are 100%- DON'T DO IT! A tankless often has 2-3x the burner of the heating system furnace. See: http://www.engineeringtoolbox.com/propane-gas-pipe-sizing-d_827.html

A power-vented tank heater with electronic ignition, installed inside of condtioned space is likely to be your best bet. With power vented units & no standing pilot the bulk of the standby losses will be to conditioned space, directly lowering the heating load on your furnace, so it's not entirely lost. By contrast, atmospheric-drafted units lose at least half the standby loss up is up the center flue and out the chimney, with minimal space-heating dividend, and drive infiltration into the house 24/365.

If most of your hot water is in long showers, a drainwater heat recovery heat exchanger can return ~50% of the total energy directly into the incoming water stream, extending the apparent-capacity of the tank (in showring mode it's nearly as good as a tankless for the first 45 minutes). It costs a lot less than a tankless, with likely higher benefit than a tankless for you:

EFI is the US distributor for PowerPipe, and are pretty easy to deal with over the phone, will open an account for you over the phone with a credit card, and ship promptly with no markup on shipping. Other vendors sometimes sell direct, others not, but don't expect to find this type of thing at the local plumbing supply house (except in Canada.)

At a 2.5gpm shower flow, a 50%+ drainwater heat recovery unit is like having an extra ~35KBTU of burner in the system during showers, but this "burner" doesn't use any fuel, and doesn't need a propane pipe upgrade to work. It's not cheap, but it's cheaper & more effective than going tankless in cases where it's possible to install them. (For slab on grade it doesn't usually work out, but in most full basements, and many crawlspace situtations it can.)

Where is the pressure regulator? At the house or at the tank? What is the capacity of the Regulator? What else is LP in the house?

If your 1/2" to the tank has a reg at the house, you may only have to upgrade the regulator and run a dedicated line to the Rinnai. 1/2" at 2 or 5PSI will cary a lot of gas! You might not even need to change the regulator. You need more information, or the installer needs to take responsibility for the the whole thing working and knowing what he is doing. I hope that this is the case already. You might just be fine.

Where is the pressure regulator? At the house or at the tank? What is the capacity of the Regulator? What else is LP in the house?

If your 1/2" to the tank has a reg at the house, you may only have to upgrade the regulator and run a dedicated line to the Rinnai. 1/2" at 2 or 5PSI will cary a lot of gas! You might not even need to change the regulator. You need more information, or the installer needs to take responsibility for the the whole thing working and knowing what he is doing. I hope that this is the case already. You might just be fine.

And even with a highest-efficiency condensing tankless, drainwater heat recovery will likely be cost-effective for 30 minutes of shower operation/day at current propane pricing. For familes that shower rather than soak it's a fairly easy economic argument to make for electric or propane water heating. (It's a bit of a stretch at $1/therm natural gas though, unless you have 3 long-showering teenagers in the house.)

I have nothing against a tankless solution, but the annual fuel bills aren't likely to be easily-measurably lower going with a 0.82 EF tankless vs. a 0.65EF tank inside of conditioned space if it's more than a ~4500 heating degree-day climate, and even summertime usage may be hard to measure the difference. But if you're using 40-50+ gallons/day in showers its not hard to measure the impact of drainwater heat recovery during the summer when HW is the primary fuel consumer, and showers are 2/3 or more of the HW use.

EF tests assume ~64 gallons/day in total HW use- if you're using more than that the tank heater's averge efficiency goes up, but the tankless remains pretty much the same. Conversely, as total water volume use falls, the net efficiency of the tank falls, but the tankless stays pretty much the same. For households with people who like long showers, it's pretty easy to blow past the EF test daily volumes: A 2gpm shower flow is ~1.6gpm from the hot water, 0.4gpm from the cold so 30 minutes worth puts you at 48 gallons before you start looking at doing the laundry, dishes or hand washing, etc. Drainwater heat recovery reduces the hot water-cold water during shower flows to ~50-50, instead of 80-20, so 30 minutes worth will be ~30 gallons from the water heater instead of 48, an 18 gallon/day (38%) reduction. During that 30 gallons of draw the supply to the heater is being pre-heated, for an even bigger difference in actual fuel burnt to make that hot water, for between 40-50% reduction of the shower-related fuel use (in the real world- sometimes higher in the lab.). If we know the incoming water temp, the actual shower flow & temp, and combustion efficiency of the hot water heater it's easy to convert those estimates into fairly precise LP gallons per shower-minute.

Yep, I'm with you on pretty much all of this however Energy savings is only one part of the puzzle. At twice the life expectancy, cost of overall ownership goes way down when factoring in replacement tank costs. Maintenance is almost nill with a good brand tankless unless you have VERY hard water and then you can deal with it unlike the tank that will fail a lot faster adn you can't clean it out. Drainwater energy recovery systems are a great idea for any water heating system especially durring long shower periods. I just can not see why if the upfront cost were not a big concern why anyone would even consider re-installing a tank if they have a choice of a quality tankless (Rinnai/Noritz etc) unit.
"but the annual fuel bills aren't likely to be easily-measurably lower going with a 0.82 EF tankless vs. a 0.65EF tank inside of conditioned space if it's more than a ~4500 heating degree-day climate,"

Right again...maybe. If the usage habits do not change then I believe they will be measurably lower. I've seen it too often. HOWEVER, I have also see people who went tankless experiance a "Lifestyle upgrade" where all of a sudden they can use that big tub...and they do. THey extend their shower sessions to very long times, or worse, their kids stay in there as long as they want and BAM, their fuel cost go UP! I've seen it both ways. I've also seen people who pulled out an electric tank, gone with a tankless and claim $70/mo savings AFTER the cost of the LP gas! In other words, the savings is specific to the conditions/system you are replacing AND the personal habits of your home. If the old tank has a layer of crud in the bottom, their savings will be lot more than if the tank is in great shape. THere are a lot of variables.

Yep, I'm with you on pretty much all of this however Energy savings is only one part of the puzzle. At twice the life expectancy, cost of overall ownership goes way down when factoring in replacement tank costs. Maintenance is almost nill with a good brand tankless unless you have VERY hard water and then you can deal with it unlike the tank that will fail a lot faster adn you can't clean it out. Drainwater energy recovery systems are a great idea for any water heating system especially durring long shower periods. I just can not see why if the upfront cost were not a big concern why anyone would even consider re-installing a tank if they have a choice of a quality tankless (Rinnai/Noritz etc) unit.
"but the annual fuel bills aren't likely to be easily-measurably lower going with a 0.82 EF tankless vs. a 0.65EF tank inside of conditioned space if it's more than a ~4500 heating degree-day climate,"

Right again...maybe. If the usage habits do not change then I believe they will be measurably lower. I've seen it too often. HOWEVER, I have also see people who went tankless experiance a "Lifestyle upgrade" where all of a sudden they can use that big tub...and they do. THey extend their shower sessions to very long times, or worse, their kids stay in there as long as they want and BAM, their fuel cost go UP! I've seen it both ways. I've also seen people who pulled out an electric tank, gone with a tankless and claim $70/mo savings AFTER the cost of the LP gas! In other words, the savings is specific to the conditions/system you are replacing AND the personal habits of your home. If the old tank has a layer of crud in the bottom, their savings will be lot more than if the tank is in great shape. THere are a lot of variables.

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Yep- there's nothing quite like the discovery that showers truly CAN be endless to encourage more hot water use, often more than enough to significantly offset efficiency differences between tanks/tankless. But the average shower lengths would have to double to defeat the gains of drainwater heat recovery. (Unfortunately this too happens, eh? )

According to multiple (and ongoing) PG & E field studies, in CA tankless units boost efficiency enough and reduce actual fuel usage on average to warrant subsidy, but the average savings are nowhere near what the EF test number ration might imply. And in heating dominated climates > 4500HDD, with same-fuel heating the annual fuel use difference between power-drafted tanks and tankless is "in the noise", even if measurable when separately metered, since significant savings really only occur during the seasons when there's no space heating load.

I'm not a big advocate of tank heaters, but if it came down to digging up 55' of fuel line just to be able to install a tankless so the missus can take her long shower without blowing the propane budget, a power-drafted tank inside of conditioned space + DWHR is a pretty-good plan-B that more than doubles showering time while saving fuel. Drainwater heat recovery usually makes sense anywhere it's explicitly stated that the occupants prefer long showers, independently of water heater type.

I have to tell you, I am very interested in the DWHR units. I have known about them for some time but never actually given them a lot of thought. THey are not in common use here. In my mind, I would think that you get a huge advantage using them on any hot water system, tankless incuded. In fact, if you only raised your incomming water from say 60*F to 70*F, the capacity of the tankless get a huge boost and the cost to heat the water goes down a lot. I would think that especially on a well system that these units would pay for themselves in less than 3-5 years, and that's if one paid an expensive plumber to install it!

I have to tell you, I am very interested in the DWHR units. I have known about them for some time but never actually given them a lot of thought. THey are not in common use here. In my mind, I would think that you get a huge advantage using them on any hot water system, tankless incuded. In fact, if you only raised your incomming water from say 60*F to 70*F, the capacity of the tankless get a huge boost and the cost to heat the water goes down a lot. I would think that especially on a well system that these units would pay for themselves in less than 3-5 years, and that's if one paid an expensive plumber to install it!

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They're not in common use anywhere, but after extensive verification & testing by Natural Resources Canada they're heavily promoted by the Canadian government as part of their national energy policy. (Most of the vendors are Canadian, no surprise.) A few US states have programs subsidizing them, primarily through electric utilities for those who heat their water with electricity.

But the benefits are beyond mere direct energy savings- it's a capacity issue. In warm-water areas where the incoming water is 60F+ even the smallest fossil-burner tanks can support an endless shower or a multiple series of showers without running cold (a WAY cheaper & more satisfactory fix than marriage counseling or divorce lawyers! ) For smaller hydronic boiler + indirect systems it can mean sizing the boiler for the heating load without needing to bump it for the hot water load, in which case a significant fraction of the DWHR is paid for up front in reduced boiler cost, and on an ongoing basis in better boiler efficiency from higher duty cycle during the heating season.

Even at 7 cents/kwh (about half the cost of an 90% efficiency propane burner at current local fuel rates near me) a Minnesota study demonstrated that for 20-30 minutes/day of 2.5gpm shower use becomes net-present-value positive in less than 5 years even without subsidy. (MN offers state subsidies for DWHR through their electric utilities.) At the current low natural gas prices it can be a tough sell on fuel savings alone, but from a capacity & convenience point of view it's still a no brainer. If it means you can save $500 on your mod-con by going with a 50-60KBTU/hr boiler instead of a 80-100KBTU/hr boiler (or a 30 gallon indirect instead of a 50) it's paid for itself on day 1000, if not day 1, even if natural gas stays cheap.

I'm with you on all of that. ONe clarification for anyone who reads this and wants to compare electric costs against, this or that other system. To calcualte your ACTUAL cost of electricity, you take the bottom line cost of your bill and divide by your kw usage! Ignore the "per KWh" cost! Your REAL cost include all taxes and other junk that are in there. This gets overlooked a lot.

I'm with you on all of that. ONe clarification for anyone who reads this and wants to compare electric costs against, this or that other system. To calcualte your ACTUAL cost of electricity, you take the bottom line cost of your bill and divide by your kw usage! Ignore the "per KWh" cost! Your REAL cost include all taxes and other junk that are in there. This gets overlooked a lot.

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Good advice, that applies to natural gas billing as well. The distribution & overhead charges exceed the fuel charges on my natural gas bill when wholesale gas is cheap.

There are still many places in the US where the true retail-residential electricity rates are under 8 cents/kwh with all charges factored in (less than half what I pay for non-heating residential rate electricity in MA.)